What the $1,000 Standard Deduction Means for Salary Packaging

A woman smiling looking paperwork for salary packaging

In our recent article, Five changes reshaping salary packaging in 2026-27, we explored several developments set to affect employee benefits over the coming years. One of the most significant is the introduction of a new standard deduction for eligible work-related expenses.

While the change is intended to assist in simplifying tax time – meaning less receipts and claiming individual expenses – it also affects how some benefits can be accessed through salary packaging, which may impact the options available to eligible employees.

What is the new $1,000 standard deduction?

From the start of the 2026-27 financial year (1 July 2026), eligible taxpayers can claim a standard deduction of up to $1,000 when lodging their tax return. According to the ATO, eligible individuals won't need to spend the full amount or keep receipts to access the deduction.

The change aims to reduce paperwork and make claiming deductions easier for many Australians.

However, those claiming eligible deductions above the $1,000 will need to retain all records to support their claim.

Why does this affect salary packaging?

The introduction of the standard deduction has led to changes in the Fringe Benefits Tax (FBT) treatment of many work-related benefits currently available through salary packaging.

As a result, employees cannot receive two tax benefits for the same expense.

Employees who currently salary package certain work-related expenses may find some of those benefits are no longer available through salary packaging from 1 April 2027. These benefits include self-education, electronic devices, home office expenses, tools of trade, uniforms and subscriptions.

Instead, eligible employees may be able to access the $1,000 standard deduction when lodging their tax return.

While some benefits will remain available through salary packaging, employees may need to review how they access and claim certain expenses once the changes take effect.

Which benefits will still be available through salary packaging?

The following benefits will remain available through salary packaging after 1 April 2027:

Key dates to know

There are two important dates to keep in mind:

1 July 2026
The new $1,000 standard deduction became available.

1 April 2027
Changes to the salary packaging treatment of many work-related benefits take effect.

Until then, existing arrangements can generally continue as normal.

What happens during the transition period?

Between 1 July 2026 and 31 March 2027, employees may still be able to access eligible benefits through salary packaging even though the new standard deduction is also available. However, the same expense generally can't be both reimbursed through a salary packaging benefit and claimed as a tax deduction. For example, if an employee salary packages a laptop, they generally can't also claim a tax deduction for that same purchase.

Because everyone's circumstances are different, the way the standard deduction applies will depend on an individual's situation., We always recommend speaking to your accountant or financial advisor about your individual circumstances.

If you’re keen to start salary packaging or wish to discuss what benefits might be available to you, call Maxxia on 1300 123 123 or visit My Maxxia (app or online).